Monday, October 01, 2007
Condos, or Apartments?
I received an email from someone (not from the Senate Square people), saying her friend had had her deposit returned because the development (recall there is more than one development at that location) is going to be apartments, instead of condos. Is this true? Has anyone else heard something like it? If it is true, does it actually matter?
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Haven't heard anything, but it wouldn't surprise me. I was house shopping in early '06 and looked at senate square and even then they seemed to be a bit evasive about plans for the east building. My lender was the one who first brought it to my attention when she saw how few units had presold. I ended up buying elsewhere. when you see how much the market has changed since then, combined with how overpriced the units were (still are?), and how behind schedule the project is, it's plausible they could just go the rental route instead. I would prefer condos though, I just think ownership is important to the progress of the neighborhood.
's holding up the senate square project?
and what about the condos across the street (300 block). used to be a gas station there, but it's been a vacant lot for YEARS. any progress update on that one?
Wouldn't surprise me one bit, considering that prices for condos in formerly hot neighborhoods like Logan Circle and Penn Quarter are getting slashed and still no takers.
I think ownership is important. Owners, on average, have more reason to care about the condition of their building and long-term development in their neighborhood. On the other hand, H street needs people, period. It needs businesses to open up in the dozens and dozens of boarded up storefronts, and it needs customers to shop in these new and existing businesses. Several hundred new residents living at H & 3rd would be a good start at a built in customer base. So, while I would prefer that Senate Square remain condos, I think it's more important for the area that Senate square is inhabited (whether as condos or apartments).
Alan - As to the 300 block of H street, my understanding is that a condo development with a planned grocery store on the first floor has (more or less) successfully navigated the approvals process. The delay is that the developer has not been able to strike an agreement with a grocery store to occupy the first floor. Harris Teeter was rumored to be interested for awhile, but ultimately took a pass. There has been some discussion of Trader Joes and others, but I don't know how concrete any of that is. If anyone has more recent (or more accurate) information I'd be interested to hear it.
The Blog DC Mud posted about this back in August: http://dcmud.blogspot.com. It looks like one of the buildings (there are 2 towers) will indeed be a rental and aparently they are adjusting prices for the condos "upward" is you can believe it.
if i'm not mistaken, it's easier to turn apartments into condos, than it is to turn condos into apartments.
so there's hope for ownership once the market perks up and it's more advantageous to sell, rather than rent a place out.
Are renters more likely to have spending money than homeowners? If so, then it would be good for folks to pour money into the neighborhood instead of into their mortgages/home improvements.
But I would still rather see homeowners move in.
Maybe I'm wrong about this, but I'd think rentals would allow a broader economic spectrum in. I don't mind if there are *some* middle class people in Abdo. As for permanence, I think the bigger concern is whether the neighborhood is nice enough to make people want to stick around -- and I agree with Mose that the sooner we get people in there, the sooner the neighborhood will get nicer.
"I don't mind if there are *some* middle class people in Abdo."
Wow, fuck you.
yeah, what the hell does that mean?
I could be wrong but my impression of DC condo buildings leads me to believe that they are filled moslty with renters even if they are Condo's. I know way more people that rent in these buildings than own in them. Mass court is my prime example, I would bet it is more than 50 percent renters. I also think this whole conversation is a bit moot since the rents for Senate Square will likely be outragous. I Would bet we will see the minimum rent for a 1 bedroom at $2000 dollars. Does anyone one know what the required market rate/low income mix is for the buildings and whether they still apply if they make them apartments?
I don't have any specific information on the rumor about at least one tower going rental, but I have certainly heard the rumor from more than one person.
As far as changing to rental from condo, what the developer will likely do is what's know as "condoized apartments". This is a recent phenomenon where technically, each unit is a condo, but the developer continues to own all the units and markets the property as a rental development.
The biggest benefit of "condoized apartments" to the developer is that when the market turns around, it is very easy to switch back to selling the units as condos rather than continuing to rent them.
This is how the (already approved) Steuart development on the north side of the 300 block of H Street is being structured.
Best,
Alan Kimber
ANC Commissioner, 6C05
Yeah, in a sense it's a creative financial instrument. I think it should be welcomed because it just helps the project to be successful despite the bad market.
Anon, seeing as how Mass Court is an apartment building, you're probably right that it is at least 50% renters!
Alan, "condoized apartments" are not an ideal situation. I live in a condo where we voted in a 30% rental cap, to prevent too many rentals. The problem with having a condo with too many renters is in financing, as Fannie Mae will not issue (or refinance) mortgages in a condo where there are more than 50% non-owner occupied units. This greatly limits the amount of buyers/sellers for Senate Square. The only way around this situation is to put 20% down -- how many people will do that for a $500k and up condo?
I think more saavy homeowners will not pick a "condoized apartment" to buy into. Some who do may have trouble later if they buy first with an ARM and can't refinance later. Others who buy early and want to sell in the short term risk competing with the developer--ala 555 Mass Ave.
And I'm sure the developers would rather not have to do this at all, they probably aren't property managers.
rent at $2k for a one bedroom is not that outrageous. in NY, that would be a bargain.
think about it.
i know some people that live in VA, and work in DC. they drive to a metro station, and then take the train in to work. add up the costs (gas, car insurance, the value of your commute in hours lost, etc), and it actually makes sense to move into a $2k apt. with a five minute walk to union station. AND you don't have to think that you're stuck with having made a bad long term investment in an overpriced condo. ;o)
of course, it'd be even better if you had a grocery store right outside your front door...
I'm not that anonymous who made the crack about having some middle class people in the neighborhood but I think what he was getting at was that at the prices that those places were selling for, the middle class would be priced out of the the condo development. As a rental, some middle class will be able to afford to live there.
Dave,
My expectation is that when the market turns and the developer then looks to sell the units, all, or the vast majority would be cleared out and sold at the same time--like it was a new condo building. Although I wasn't clear, I didn't mean that the developer would start selling off individual units.
The developer-owner would be familiar with the financing problems that would be faced by individual buyers, so they would have a strong incentive to sell the units all or mostly at once--otherwise, they would have no buyers.
Steuart Development has indicated that they will be keeping ownership of all the units and will be managing the rental operations (or hiring someone to do so for them).
The towers at Senate Square are actually being developed by Broadway Development, which is a large company out of New York. Unlike Abdo Development (doing the Children's Museum only), I'm quite certain that Broadway does own & manage apartment buildings.
Best,
Alan Kimber
ANC Commissioner, 6C05
Alan,
That sounds all well and good about putting the majority of the units on the market at the same time. Of course the existing tenants of the building will have rights when that times comes, so it still seems to me to be a somewhat risky angle.
But I have no interest in the building itself, like others, I just want more neighbors!
Dave,
There must be some overall benefit to the developer, but I'm not sure I fully understand it either. I agree that what we ultimately need is more neighbors, regardless of how we get there.
Best,
Alan Kimber
ANC Commissioner, 6C05
Unless those new neighbors are middle-class, that is.
Kidding. We kid because we love.
although..... those middle class neighbors aren't going to be able to shop at the yes! organic store that might just be moving in next door.
if all the new neighbors could just be upper class folk, we could sustain all these new high end developments occuring throughout the corridor. it might even be enough to drive out some of the mediocre developents so we could get the real deal - like starbucks et. al.
(you didn't take me seriously, did you? tsk, tsk...)
here's a relevant post from dcmetrocentric.com
Since the market slow down, the builders have slowed the pace of the build-out in order to save on costs. This slowing down of construction is becoming a prevalent method builders are employing to stretch out when new buildings come to market.
It is understandable that builders with multiple new properties in an area would want to delay bringing properties to market, however this practice leaves those who bought into developments early in the lurch. The other method some area condos are using is converting the unsold units to rentals until the market bounces back.
The problem with having "just homeowners" is you shut out all the vibrant youth in the 20's that cant afford to buy yet. Do you think williamsburg in brooklin, U street and other places were made interesting because of owners? No, it was due to renters, then the owners started to make it overpriced and bland. Its young, open minded people that make an area worth living. Not old crotchedy people like those on most neighborhood message boards and mailing lists.
My understanding is that the towers are for sale. Not as individual condos, but as whole apartment buildings. They have been being marketed for about 6 months now with no takers as of yet; I would calculate that they are trying to sell the buildings vacant before they completely finish them.
If that doesn't work out for Broadway they will likely rent as apartments. They were lucky enough to have started this nightmare as a condo building and likely have condo docs drawn up. If they don't have the building (legally) split up into condos prior to renting out the units (as apartments) they will later face the painful process of dealing with DC's tenant laws when it comes time to sell it off.
Broadway is in a tough spot and will likely have to wait a long time to turn this thing around. They bought this land from Abdo (basically giving him the Museum building that he kept for free) and designed this building to be built at a condo level of revenue. There is a big difference between a condo level of finish and one that you would build to be supported by market rents. (read: taking a loss for a long time)
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